The Ugly Truth Behind Renting Out Unwanted Property
When you hear of real estate investments, what comes to mind?
Most individuals in today’s society have a vague understanding of the benefits of becoming a real estate property owner – it can provide a passive income, create financial opportunity and wealth, and protect individuals against losing capital through inflation. Therefore, when people acquire properties, they often believe that renting the unit or units is the best option. However, renting properties is not an easy task and unless you are 100% committed, it may be damaging to your well-being, including emotionally, physically, and financially.
Emotionally. Managing a rental property can be time-consuming and emotionally draining. You may be dealing with troublesome tenants or unexpected neighborhood changes. You must always be knowledgeable of the market and up to date with current trends.
The challenges associated with maintaining the property can have adverse effects on your relationships – especially if you are resentful of the concept that you must manage the asset you have acquired. The increased stress level can create short tempers, aggravation, and mental fatigue.
Physically. Emotional stress can take a burden on you physically, creating unexpected exhaustion – it sets off a series of reactions in your body that affects your sympathetic nervous system. Continued stress without proper care can slow or shut down your digestive system, increase cardiac output, and increase blood sugar. The effect on your body is that it places your body in “flight” mode.
Furthermore, managing a property often takes a physical strain to complete any maintenance. Depending on the help that you have, you may be responsible for maintenance issues such as fixing roofing and reflooring a unit. This work is physically exhausting and can cause sudden and unexpected pains throughout your body.
Financially. Investment properties do not guarantee an income – especially unwanted properties. There is specific knowledge and expertise that must be practiced at all times to ensure the financial benefits of the unit.
Can you afford the cost of maintenance? Can you pay the taxes? Can you balance a profit and loss statement? Can you risk having vacancies and poor tenants? These are all questions to consider when analyzing the pros and cons of managing an unwanted property. When examining the profit and loss statement, consider the following:
● Repairs can be expensive
● You will be responsible for taxes
● Vacancies can create negative cash flow
● Marketing vacancies will cost money
● Laws protect tenants – even bad ones
● Owning real estate can have unexpected legal issues arise
● Real estate owners are responsible for liability insurance
It may be time to assess if renting out your property is the best-suited option. This is especially important to consider if you obtained the property unexpectedly, whether through a divorce or inheritance.
Is Selling A Better Option?
It may seem irrational to sell a property when there is a potential to get income. However, knowing the risks can not only save you money in the long run but also protect your health. If you inherit an unwanted property, there are options you have if you sell the asset.
● Sell your property and find a property that interests you. Success in real estate requires attention and passion. If you have the opportunity to capitalize on an inherited property to purchase a unit that you would enjoy managing, go for the chance. For example, if you inherit a property two hours away from your home, consider selling and purchasing a rental home nearby. This simple move can provide you the same advantages of owning the original, but also save you time and money from reduced commute time.
● Use the equity from the house to pay off your debt – then invest in real estate. If you wanted to utilize the income to get ahead, try getting extra funding built up and then using those funds for investing in other ventures and types of profitable transactions. This method provides you with more risk availability when you are managing an asset – for example, holding out on renting a vacant unit for a better tenant will not be as much of a risk if your entire livelihood doesn’t depend on the income.
● Invest elsewhere – maybe real estate is not for you, and that is okay! There is a multitude of ways to invest your money, whether it be in stocks or bonds. All investment options have the potential for wealth growth, so indulge in the one that interests you.
If you are looking to sell, you have two options – sell on the market or find an off the market buyer. Selling on the market takes time and energy. Selling off the market, however, can provide ease to the transactions and reduce the time frame.
If you are interested in exploring your options, contact us at Gulf State Homebuyers and we can get started with a FREE consultation.